Expert Insights

The Benefits of Rolling Over a 401(k) or 403(b) to Betterment Whether you have a single old plan or several accounts with previous employers, there may be reasons to consider rolling them over to Betterment. When you switch jobs, your old employer-sponsored retirement plan (401(k), 403(b), etc.) still belongs to you, but it becomes inactive and you can’t continue to make contributions. So what should you do with it? Whether you have a single plan or several, there are some good reasons to consider transferring your old 401(k) or 403(b). Betterment makes it simple to roll over your old employer-sponsored retirement plan into an IRA – or a Betterment 401(k) if you have one through your current employer. Either way, we invest your money in a low-cost, globally diversified portfolio, and we offer personalized advice while acting in your best interest. How can you know if that’s the right move for you? Let’s talk about it. In this guide, we’ll: Explain your options when dealing with an old 401(k) or 403(b). Walk through key questions you should ask when making your decision. Talk about the potential benefits that can come with rolling over your old account to Betterment. Show you how to get started. What can you do with your old 401(k) or 403(b)? Employer-sponsored accounts can be a great way to save for retirement. They have valuable tax advantages and come with higher contribution limits than an IRA. But after you leave a job, it’s important to consider what you do next with your plan. You have a few options: Keep it where it is. Roll it over to your current or future employer’s plan. Roll it over to an IRA. Take a cash distribution to your personal checking account. Keeping your 401(k) or 403(b) where it is or moving it to your new plan may result in high fees, confusing investment selections, a lack of financial planning options, or a portfolio not appropriate for your goals. And taking a cash distribution to yourself is a taxable event that can cause the IRS to hit you with early distribution fees. None of those situations are ideal. By contrast, rolling over your 401(k) or 403(b) into an IRA could give you more control over your investment options, which could lead to lower fees, and can allow you to organize your funds from most previous employer-sponsored plans by combining them in one place. At Betterment, your IRA can be invested in any one of our diversified, expert-built portfolios and personalized to your own appetite for risk. What should you consider when exploring your options? Before rolling over your 401(k) or 403(b) into an IRA, you should know exactly what will happen to your money, what your options are, and how it could impact your future retirement goals. Everyone’s situation is a little different. So, how do you know if you should switch? While not exhaustive, here are some factors to consider when you’re making this decision. Start by asking your old plan provider about fees and investment options so you can make an informed comparison. Operationally, we don’t charge for rollovers on our end, but your old 401(k) or 403(b) plan provider may charge you for closing your account with them. Next, consider taxes. When rolling over a 401(k), 403(b), or any other-employer sponsored plan to an IRA,, we use the direct rollover method designed to prevent any withholding or negative tax consequences. But there are two important things to remember: Be sure to designate a distribution from your current provider as a rollover. If you have a traditional 401(k) or 403(b), you typically want to roll it over into a traditional IRA. If you have a Roth 401(k) or 403(b), you must roll it over into a Roth IRA. If you withdraw from a traditional 401(k) or 403(b) as a “non-rollover” before age 59 ½, you’ll face a 10% penalty for an early withdrawal. If you roll over from a traditional plan into a Roth IRA, you’ll have to pay income taxes on the money. These situations are unnecessary for investors in most circumstances. Other questions to consider include the following: What investments are currently available and how do they compare to your other options? What are your current fees and how do they compare to your other options? Will you need protections from creditors or legal judgments? Are there required minimum distributions associated with certain accounts? How does your employer plan treat employer stock? Could the rollover impact your Roth conversion strategy? When deciding whether to roll over a retirement account, you should carefully consider your unique situation and preferences. Research the details of your current account, and consult tax professionals and other financial advisors with any questions. What are some potential benefits of rolling over to Betterment? At Betterment, rollovers are simple, automated, and personalized. In just a short time, you can open up a Betterment IRA, receive and review personalized portfolio recommendations, and generate rollover instructions entirely online. If you’re transferring more than $20,000, you’ll have complimentary access to our Licensed Concierge team. Here’s why you should consider rolling over your 401(k) or 403(b) into an IRA with Betterment. Access to different investment options IRAs can include more investment options than a 401(k) or 403(b) plan. With employer retirement plans, administrators typically only give you a few options to choose from and limited to no guidance on which options may be best for you. You might end up in a portfolio that’s not appropriate for your retirement goals, or you might have to choose from limited high-cost mutual funds. An IRA held at a brokerage or investment advisor—like Betterment—can provide you with access to a broader universe of investment options. Some investment advisors and brokerages that provide self-directed IRAs may offer access to an entire universe of investments such as single stocks, mutual funds, ETFs, and alternative investments. At Betterment, we only offer investment portfolios consisting entirely of ETFs in our IRAs due to the benefits we believe they provide. However, we understand investors have personal preferences and different appetites for risk so we offer a suite of ETF portfolio strategies that allow investors to personalize investments to better align with their values and/or risk tolerance. Compare your investment fees IRA fees may be lower than those your plan administrator charges. You should compare the expense ratios (fees) between your 401(k) and our investments in an IRA. And depending on your plan, keeping funds within your 401(k) plan after leaving your employer may subject you to additional management fees. At Betterment, we charge one fee for managing your IRA funds—our management fee. Betterment’s IRA management is available for 0.25% (25 bps) per year or $4 per month for those in our Digital plan, or 0.40% (40 bps) per year for those in our Premium plan. The ETFs you invest in through Betterment charge a fee themselves, but we pride ourselves in picking low cost and tax efficient funds, with the goal being to maximize your take home returns. You can explore an overview of the fund fees in each of our strategies here. If you have an existing IRA at Betterment, you can log into your account and view the “Holdings” tab to see a breakdown of the fund fees for your Betterment portfolio so that you can easily compare them with the options at your current provider. Manage your portfolio in one place Many investors appreciate the peace of mind that comes with having all their investments in one place. Understanding a fuller picture of your savings can help you make better estimates about your future budget. It can also help you to manage your overall risk and portfolio diversification more effectively to keep you on track for long-term success. Depending on your situation, moving your retirement assets to one provider may also improve the tax-efficiency of your taxable investments. Access personalized advice Betterment offers personalized retirement planning advice and projections via our in-app tooling. For those looking for assistance on topics not covered by our automated guidance, our team of Certified Financial Planners™ is available via our Advice Packages and Premium plan to provide more in-depth financial planning. How do you start a rollover? When you’re ready to roll over an account, it’s easy to get started. Sign up for Betterment and log into your account, click on “Transfer or rollover” at the top right-hand side of your home screen, then answer a few simple questions. We need to know about your 401(k) or 403(b) provider, the type of funds held in your account, and their estimated values. We’ll email you a full set of personalized instructions, including any information we need to complete the transfer. This will include your unique Betterment IRA account number, how your provider should make your rollover check payable, and where the rollover check should be mailed. Some providers mail the check directly to Betterment, others will mail the checks to you and request that you forward them to Betterment. Regardless, as long as you follow our instructions it’ll be considered a direct rollover without penalties or taxes. Some providers may also require you to fill out their rollover paperwork, or they may ask you to give them a call. If so, there’s generally no way around it. But your email from Betterment should give you all the information they’ll ask you for. Once the check arrives, we’ll automatically invest it and send you another email confirming your rollover has completed. This process also applies to other employer-sponsored plans beyond 401(k)s and 403(b)s, including pensions, 401(a)s, 457(b)s, profit sharing plans, stock plans, and Thrift Savings Plans (TSPs), if moving those investments is the right choice for your unique financial situation. If you have any questions before or during your rollover process please reach out to rollover@betterment.com, and our customer support team is here to help.

Thinking of Transferring an IRA to Betterment? Whether you manage your IRAs yourself, or have another advisor doing so, there may be some reasons to consider moving them to Betterment. Some folks have IRAs because they rolled over former employer-sponsored plans (like a 401(k), 403(b), pension plan, etc.). Others start IRAs via direct contributions. And savvy investors may have done both. Saving in IRAs can help investors reach their retirement goals, but the abundance of options for managing them can make it difficult to determine which strategy is best suited to your needs. Whether you're managing your IRA(s) on your own or paying an advisor to do it for you, you may not be making the most of your money. At Betterment, we invest your money in a low-cost, globally-diversified portfolio, and we offer personalized advice while acting in your best interest. How can you determine the right move for you? Let’s talk about it. In this guide, we’ll: Explain your options for managing IRAs. Walk through key questions you should ask when making your decision. Talk about some considerations to keep in mind when transferring your IRA account to Betterment. Show you how to get started. What can you do with your IRA(s)? IRA accounts can be a great tax advantaged way to save for retirement. While they generally offer more flexibility compared to employer-sponsored plans, it can be easy to be overwhelmed by your potential options: Keep them at your current provider(s) Roll them over to your current or future employer’s plan (if your plan allows) Use the funds for non-retirement needs, though there could be a tax penalty Transfer them to a platform like Betterment Some investors choose to “self-direct” their IRA(s) by selecting and managing their own investments while others have a dedicated advisor manage their IRA(s) for them. If you’re happy with your current strategy, you can always keep your IRA funds with your current institution(s). Alternatively, using a low-cost, transparent advisor that’s legally bound to act in your best interest can help you navigate many of the challenges that come with investing and focus on the factors you can control. At Betterment, our diversified, expert-built portfolios, automated portfolio management, and fiduciary advice take the guesswork out of managing your IRAs. While the flexibility of IRAs offers some benefits, it may make sense to rollover your IRA funds into your current or future employer-sponsored retirement plan, such as a 401(k). There are many reasons moving funds into your active employer plan may be optimal, but it’s often performed when investors are attempting more complex Roth conversion strategies. However, it’s essential to confirm whether your plan accepts rollovers as not all plans do, and Roth IRA funds are not eligible for a rollover into a qualified plan. Finally, some investors may need to tap into their IRAs for needs/goals other than retirement. While there are some IRS exceptions to the tax on “early/premature” distributions (before age 59 ½), withdrawals may result in penalties and/or taxes. How do you know if moving around your IRA(s) makes sense? Before making changes to your retirement accounts, you should know exactly what will happen to your money. Everyone’s situation is a little different. So, how do you know if you should make a switch? While not exhaustive, here are some factors to consider. If you work with an advisor, ask them about the fees and available investment options so you can make an informed comparison. If you’re managing your IRAs on your own, it can help to consider the benefits of automated portfolio management and compare your choice in investment selection to what a new platform could offer. Questions to consider include the following: What investments are currently available, and how do they compare to your other options? What fees are you paying, and how do they compare to your other options? What advice and planning guidance do your options provide? What other features are important to you (e.g., optimized time, risk management, tax efficiency)? When deciding whether to transfer an IRA, you should carefully consider your unique situation and preferences. Research the details of your current account and consult tax professionals and other financial advisors with any questions. What are some potential benefits of transferring IRA(s) to Betterment? While everyone's situation is different, there are some potential benefits you should consider when deciding whether to roll over to Betterment: Get access to expert-built portfolios and automated risk management An IRA held at a fiduciary investment advisor—like Betterment—can provide you with access to expert-built portfolios. What does that mean, exactly? Our investing team monitors and selects low-cost ETFs to create globally diversified portfolios personalized to your goals. This team meets regularly to review and make adjustments to the portfolios (as necessary), in an effort to maximize returns while maintaining an appropriate level of risk for your situation. Additionally, our automated rebalancing and auto-adjust features keep you on track as the markets move and you work towards your long-term retirement targets. We offer a suite of ETF portfolio strategies due to the benefits we believe they offer, but some providers and investment managers may offer additional investment choices such as single stocks, mutual funds, ETFs, and alternative investments along with managing risk through similar automated or manual rebalancing strategies. Manage your investment costs Depending on your current strategy, a switch to a low-cost provider like Betterment can result in fee savings, which can compound over time to significantly increase your long-term returns. At Betterment, we charge one fee for managing your IRA funds—our management fee. Betterment’s IRA management is available for 0.25% (25 bps) per year or $4 per month for those in our Digital plan, or 0.40% (40 bps) per year for those in our Premium plan. Compare that to what you are paying now to get a sense of the difference in fees. The ETFs you invest in through Betterment charge a fee themselves, but we pride ourselves in picking low cost and tax efficient funds, with the goal being to maximize your take home returns. You can explore an overview of the fund fees in each of our strategies here. If you have an existing IRA at Betterment, you can log into your account and view the “Holdings” tab to see a breakdown of the fund fees for your Betterment portfolio so that you can easily compare them with the options at your current IRA provider. While we believe in the value we our service can deliver, Betterment may be more costly than your current strategy or alternatives, so it’s important to review fees and the features offered carefully to make an informed decision. Manage your portfolio in one place Many investors appreciate the peace of mind that comes with having their investments in one place. Understanding a fuller picture of your savings can help you determine optimal savings strategies and benefit from more accurate retirement planning guidance. It can also help you to manage your overall risk and portfolio diversification more effectively to keep you on track for long-term success. Maximize your tax efficiency Investors who are saving for retirement at Betterment in at least two types of accounts (taxable, Traditional IRA, Roth IRA) may benefit from more advanced tax strategies like asset location through our Tax-Coordinated Portfolio. Additionally, managing your investments in one place can help you maximize the effectiveness of tax-loss harvesting in your taxable accounts by making sure the activity in your IRA(s) does not result in wash sales. Access personalized advice Betterment offers personalized retirement planning advice and projections via our in-app tooling. For those looking for assistance on topics not covered by our automated guidance, our team of Certified Financial Planners™ is available via our Advice Packages and Premium plan to provide more in-depth financial planning. How do you start the transfer? At Betterment, transfers are simple, automated, and personalized. You can open up a Betterment IRA, receive and review personalized portfolio recommendations, and generate transfer instructions entirely online. If you’re transferring more than $20,000, you’ll have complimentary access to our Licensed Concierge Team. When you’re ready to transfer an IRA account, it’s easy to get started. Sign up for Betterment and log in to your account, click on “Transfer or rollover” at the top right-hand side of your home screen, then answer a few simple questions. In many cases, you can initiate IRA transfers via the industry standard electronic ACATS transfer process and our platform will take care of the process from there. If that’s not an option, our Support and Licensed Concierge Teams are available to help you navigate the transfer requirements and minimize the paperwork required. Once your funds arrive at Betterment, we’ll automatically align them to your new strategy upon receipt and send you another email confirming your transfer has completed. If you have any questions before or during your rollover process please reach out to rollover@betterment.com, and our Customer Support Team is here to help.

What’s The Best Crypto to Buy Now? (Hint: There’s Not One) Here are three reasons why you shouldn't try to find the “best” cryptocurrency to buy now. (And what you can do instead.) If you decide to go on a Google search hunt for the best cryptocurrency to buy this year, you may find yourself down a rabbit hole in an unfamiliar and uncomfortable part of the internet. (Don’t worry, we’ve all been there at some point.) And if you don’t end up there, you may find yourself on one of the many generic investing websites, all offering you similar “top cryptocurrencies to buy in 2022” lists. You’ll find the usual suspects here, mostly based on market capitalization or even personal preference of the writer. It’s common for these lists to include Bitcoin, Ether, Solana, Cardano, Binance Coin, Polkadot, and Avalanche. All fair examples but no need to do a Google search at this point.  Instead of attempting to discover the next best cryptocurrency or token, we favor a different mental model. Ask yourself this question: What’s the best area of crypto to invest in, not now, but over the next three years? (Or whatever time horizon you are investing within.) You’ll see that trying to find the needle in the haystack—and it’s an incredibly large haystack—is probably not the best route to take. Rather, we recommend a more long-term, wide-reaching approach to selecting your investments. Three Reasons Not to Find the "Best" Crypto To sum it up, here are three reasons why you shouldn't try to find the “best” cryptocurrency to buy now. (And what you can do instead.) 1. You’re probably not a professional crypto investor. (And that’s perfectly OK.) If you are like nearly everyone, you’re not a professional crypto investor. Absolutely fine. Similar to any other asset class, non-professional crypto investors are at a disadvantage when it comes to technical resources, market data, and general industry knowledge. At Betterment, we have people whose job it is to research individual crypto assets and analyze the pros and cons of including them on our platform.  So instead of pretending to be a crypto day trader in search of a new token that’ll take you to the moon, we recommend staying on planet earth. One way to do this is to learn about broad sectors in crypto and decide for yourself which areas you think may have the most growth potential. Among other things, we’re talking about the metaverse, decentralized finance, and Web 3.0. You could take it a step further and read up on NFTs but you may just be tempted to right-click-save on a picture of an ape that for some strange reason you can’t stop staring at—avoid the temptation, for now. Read up on crypto sectors, and if you’re feeling up to it, try explaining them to your friends or family to see if you grasp the important notes. This approach will give you a wider understanding of the crypto industry and pairs well with our next two recommendations.  2. You don’t have enough time. (Join the club!) Making wise investment decisions takes time. One of the best investors to ever live, Warren Buffet, reads 80% of his day. We’re going to guess you can’t spend 80% of your day reading about crypto. So how do you make up for this? As we said, educate yourself about crypto industry sectors instead of searching for individual assets. But don’t stop once you can explain what the metaverse is and why it could change the future. Yes, you are short on time, but if you have done the work to understand sectors in crypto and are interested in investing, you have two very important questions to ask yourself: How much do I want to allocate into crypto? And what is my time horizon? These are very personal questions. And with the little time you do have, ones worth thinking about. Knowing the amount you are comfortable investing and when you need to withdraw the funds will help you better understand the risks and make a decision that lets you sleep at night. We like sleep. 3. You’re increasing your risk. (Not a good thing.) Investing in one cryptocurrency is not quite comparable to putting all of your eggs in one basket. It’s more like having one egg. One cryptocurrency, like one egg, can be fragile, or in financial language, volatile and prone to losses. It lacks any diversification within the crypto asset class. Diversification is a complex subject, but generally speaking, the goal of diversification is to invest in uncorrelated assets to reduce the risk of losses in a portfolio while enhancing its expected return. Moral of the story: we recommend diversification. Consider how your crypto investments fit into your larger diversified portfolio of uncorrelated assets. Within crypto, you can consider spreading your investments across multiple assets and even multiple sectors within crypto. One way of thinking about it is since predicting the future is near impossible, diversification sets you up for various outcomes. We built diversified crypto portfolios to give you the choice to invest across the crypto asset class.

What Is A Fiduciary, And Do I Need One for My Investments? When it comes to getting help managing your financial life, transparency is the name of the game. When you seek out financial advice, it’s reasonable to assume your advisor would put your best interests ahead of their own. But the truth is, if the investment advisor isn’t a fiduciary, they aren’t actually required to do so. So in this guide, we’ll: Define what exactly a fiduciary is and how they differ from other financial advisors Consider when it can be important to work with a fiduciary Learn how to be a proactive investment shopper What is a fiduciary, and what is the fiduciary duty? A fiduciary is a professional or institution that has the power to act on behalf of another party, and is required to do what is in the best interest of the other party to preserve good faith and trust. An investment advisor with a fiduciary duty to its clients is obligated to follow both a duty of care and a duty of loyalty to their clients. The duty of care requires a fiduciary to act in the client’s best interest. Under the duty of loyalty, the fiduciary must also attempt to eliminate or disclose all potential conflicts of interest.  Not all advisors are held to the same standards when providing advice, so it’s important to know who is required to act as a fiduciary. Financial advisors not acting as fiduciaries operate under a looser guideline called the suitability standard. Advisors who operate under a suitability standard have to choose investments that are appropriate based on the client’s circumstances, but they neither have to put the clients’ best interests first nor disclose or avoid conflicts of interest so long as the transaction is considered suitable. What are examples of conflicts of interest? When in doubt, just follow the money. How do your financial advisors get paid? Are they incentivised to take actions that might not be in your best interest? Commissions are one of the most common conflicts of interest. At large brokerages, it’s still not uncommon for investment professionals to primarily rely on commissions to make money. With commission-based pay, your advisor might receive a cut each time you trade, plus a percentage each time they steer your money into certain investment companies’ financial products. They can be motivated to recommend you invest in funds that pay them high commissions (and cost you a higher fee), even if there’s a comparable and cheaper fund that benefits your financial strategy as a client.  When is it important to work with a fiduciary? When looking for an advisor to trade on your behalf and make investment decisions for you, you should strongly consider choosing a fiduciary advisor. This should help ensure that you receive suitable recommendations that will also be in your best interest. If you want to entrust an advisor with your financials and give them discretion, you may want to make sure they’re legally required to put your interests ahead of their own. On the other hand, if you’re simply seeking help trading securities in your portfolio, or you don’t want to give an advisor discretion over your accounts, you may not need a fiduciary advisor. How to be a proactive investment shopper Hiring a fiduciary advisor to manage your portfolio is one of the best ways to try and ensure you are receiving unbiased advice. We highly recommend verifying that your professional is getting paid to meet your needs, not the needs of a broker, fund, or external portfolio strategy. Ask the tough questions: “I’d love to learn how you’re paid in this arrangement. How do you make money?” “How do you protect your clients from your own biases? Can you tell me about potential conflicts of interest in this arrangement?” “What’s the philosophy behind the advice you give? What are the aspects of investment management that you focus on most?” “What would you say is your point of differentiation from other advisors?” Some of these questions may be answered in a Form CRS, which is a relationship summary that advisors and brokers are required to give their clients or customers as of summer 2020. You should also know the costs of your current investments and compare them with other options in the marketplace as time goes on. If alternatives seem more attractive, ask your advisor why they haven’t suggested making a switch. And if the explanation you get seems inadequate, consider whether you should continue working with your investment professional. Why is Betterment a fiduciary? A common point of confusion is whether or not robo-advisors can be fiduciaries. So let’s clear up any ambiguities: Yes, they certainly can be. Betterment is a Registered Investment Advisor (RIA) with the SEC and is held to the fiduciary standard as required under the Investment Advisers Act. Acting as a fiduciary aligns with Betterment’s mission because we are committed to helping you build a better life, where you can save more for the future and can make the most of your money through our cash management products and our investing and retirement products. I, as well as the rest of Betterment’s dedicated team of human advisors, are also Certified Financial Planners® (CFP®, for short). We’re held to the fiduciary standard, too. This way, you can be sure that the financial advice you receive from Betterment, whether online or from our team of human advisors, is in your best interest.

What You Should Know About Financial Markets Let time work in your favor. Let the market worry about itself. Financial markets are unpredictable. No matter how much research you do and how closely you follow the news, trying to “time the market” usually means withdrawing too early and investing too late. In this guide, we’ll explain: Why a long-term strategy is often the best approach The problems with trying to time the market How to accurately evaluate portfolio performance How to make adjustments when you need to Why a long-term strategy is often the best approach Watch the market closely, and you’ll see it constantly fluctuate. The markets can be sky high one day, then come crashing down the next. Zoom in close enough on any ten-year period, and you’ll see countless short-term gains and losses that can be large in magnitude. Zoom out far enough, and you’ll see a gradual upward trend. It’s easy to get sucked into market speculation. Those short-term wins feel good, and look highly appealing. But you’re not trying to win the lottery here—you’re investing. You’re trying to reach financial goals. At Betterment, we believe the smartest way to do that is by diversifying your portfolio, making regular deposits, and holding your assets for longer. Accurately predicting where the market is going in the short-term is extremely difficult, but investing regularly over the long-term is an activity you can control that can lead to far more reliable performance over time. The power of compounding is real. By regularly investing in a well-diversified portfolio, you’re probably not going to suddenly win big. But you’re unlikely to lose it all, either. And by the time you’re ready to start withdrawing funds, you’ll have a lot more to work with. The basics of diversification Diversification is all about reducing risk. Every financial asset, industry, and market is influenced by different factors that change its performance. Invest too heavily in one area, and your portfolio becomes more vulnerable to its specific risks. Put all your money in an oil company, and a single oil spill, regulation, lawsuit, or change in demand could devastate your portfolio. There’s no failsafe. The less you lean on any one asset, economic sector, or geographical region, the more stable your portfolio will likely be. Diversification sets your portfolio up for long-term success with steadier, more stable performance. The problems with trying to time the market There are two big reasons not to try and time the market: It’s difficult to consistently beat a well-diversified portfolio Taxes Many investors miss more in gains than they avoid in losses by trying to time a dip. Even the best active investors frequently make “the wrong call.” They withdraw too early or go all-in too late. There are too many factors outside of your control. Too much information you don’t have. To beat a well-diversified portfolio, you have to buy and sell at the perfect time. Again. And again. And again. No matter how much market research you do, you’re simply unlikely to win that battle in the long run. Especially when you consider short-term capital gains taxes. Any time you sell an asset you’ve held for less than a year and make a profit, you have to pay short-term capital gains taxes. Just like that, you might have to shave up to 37% off of your profits. With a passive approach that focuses on the long game, you hold onto assets for much longer, so you’re far less likely to have short-term capital gains (and the taxes that come with them). Considering the short-term tax implications, you don’t just have to consistently beat a well-diversified, buy-and-hold portfolio. In order to outperform it by timing the market, you have to blow it out of the water. And that’s why you may want to rethink the way you evaluate portfolio performance. How to evaluate portfolio performance Want to know how well your portfolio is doing? You need to use the right benchmarks and consider after-tax adjustments. US investors often compare their portfolio performance to the S&P 500 or the Dow Jones Industrial Average. But that’s helpful if you’re only invested in the US stock market. If you’re holding a well-diversified portfolio holding stocks and bonds across geographical regions, the Vanguard LifeStrategy Funds or iShares Core Allocation ETFs may be a better comparison. Just make sure you compare apples to apples. If you have a portfolio that’s 80% stocks, don’t compare it to a portfolio with 100% stocks. The other key to evaluating your performance is tax adjustments. How much actually goes in your pocket? If you’re going to lose 30% or more of your profits to short-term capital gains taxes, that’s a large drain on your overall return that may impact how soon you can achieve your financial goals. How to adjust your investments during highs and lows At Betterment, we believe investors get better results when they don’t react to market changes. On a long enough timeline, market highs and lows won’t matter as much. But sometimes, you really do need to make adjustments. The best way to change your portfolio? Start small. Huge, sweeping changes are much more likely to hurt your performance. If stock investments feel too risky, you can even start putting your deposits into US Short-Term Treasuries instead, which are extremely low risk, highly liquid, and mature in about six months. This is called a “dry powder” fund. Make sure your adjustments fit your goal. If your goal is still years or decades away, your investments should probably be weighted more heavily toward diversified stocks. As you get closer to the end date, you can shift to bonds and other low-risk assets. Since it’s extremely hard to time the market, we believe it’s best to ride out the market highs and lows. We also make it easy to adjust your portfolio to fit your level of risk tolerance. It’s like turning a dial up or down, shifting your investments more toward stocks or bonds. You’re in control. And if “don’t worry” doesn’t put you at ease, you can make sure your risk reflects your comfort level.

Three Keys to Managing Joint Finances With Your Partner Talking about money with your partner can be a difficult conversation. The key is to have open communication, sooner rather than later. Money has wrecked its fair share of relationships. Maybe you’ve even seen one of yours go up in flames because of it. But it doesn’t have to. And while every partnership is different, we’ve seen an emphasis on three areas help our clients avoid the worst of money fights: Communication Prioritization Logistics Whether you’re married or not, and whether you join your accounts or keep them separate, they can help soften one of love’s thorniest topics. Open (and keep open) those lines of communication When you choose to share your life with someone special, you bring all sorts of baggage with you. Among the bags you might want to start unpacking first is your relationship with money. It could be complicated, and there’s probably all sorts of emotions wrapped up in it—especially with debt—but transparency can help avoid unpleasant surprises down the road. So to start with, try sizing up the financial state of your union by crunching a few numbers for each of you: Net worth (assets − liabilities) This can be the most emotionally-charged of numbers, and it’s no surprise why. It’s right there in the name: net worth. We tend to bundle up our concept of our own self-worth with our finances, and when those finances don’t look pretty, feelings of shame or embarrassment may follow. So it’s important to support each other during this exercise. Help your partner feel safe enough to share these sensitive details in the first place. When you’re both ready, add up all your assets (cash, investments, home equity, etc.), then subtract your total liabilities—namely debt (credit cards, student loans, mortgage, etc.)—to get a good sense of your separate and combined balance sheets. If you’re a Betterment customer, connecting your external financial accounts to Betterment can be a handy shortcut for this number-crunching.  Cash flow (income − expenses) Now comes the time to size up how much money is coming in and going out each month, with the difference being what you currently have available to save for all your goals (more on those later). For simplicity’s sake, it can be easier to start with your take-home pay, which may already factor in payroll taxes and expenses such as health care insurance. If you already contribute to a 401(k), which automatically comes out of your paycheck, be sure to count this toward your tallied savings when the time comes!   Toss in a survey of your respective credit scores, which could affect future goals such as home ownership, and you’ve started to lay the foundation for a healthier money partnership. And by no means is this a one-time exercise. For some couples, it helps to schedule a monthly financial check-in. Why monthly? Some people don’t like talking about finances at all. A monthly check-in gives you a safe space to start the conversation. Others think and talk about money all the time, which can be draining on a partner. Unless it’s urgent, you can make a note and wait to bring it up until the next check-in. A recurring monthly check-in solves both these problems and provides a forum to talk about upcoming big expenses and important money tasks, among other things. To make things fun, you can build your check-ins around something you already enjoy, like a weekend morning coffee date.  Prioritize as partners With key details like your net worth and cash flow in place, next comes the process of visualizing what you—as individuals and as a couple—want your money to do for you and your family. Couples don’t always see eye-to-eye on this, so now's the time to hash out any differences of opinion. If you have financial liabilities, know that it’s possible to manage debt and save at the same time; it all comes down to prioritizing. In general, we recommend putting your dollars to work in this order: Assuming your employer offers a 401(k) and matching contribution, contribute just enough to your 401(k) to get the full match so you’re not leaving any money on the table. Address short-term, high-priority goals such as: High-interest debt Emergency fund (3-6 months’ worth of living expenses) Save more for retirement in tax-advantaged investment accounts such as a 401(k) and IRA. How much more? Sign up for Betterment and we can help you figure that out. Save for other big money goals such as home ownership, education, vacations, etc.  The devil is in the details with #4, of course. And you may not be able to save as much as you need to for every single goal at this time. Just know that if you start at the top and set specific goals—”I’ll contribute X amount of dollars each month to pay off my high-interest debt in X number of years,” for example—you’ll eventually free up cash flow to put toward priorities that fall further down on your list. And if you’re looking to free up extra dollars to save, consider tracking your expenses with a budgeting tool.  Tend to the logistical paperwork With your planning well underway, next comes execution. How exactly will you set up your financial accounts? If you’re married, will you file taxes jointly or separately? And how will you update (or set up for the first time) your estate plan? These are three big questions best to start considering now. Set up your accounts for success There’s the process of jointly managing finances with your significant other, then there's the actual act of opening joint accounts. These are accounts you both share legal ownership of.  Whether or not you decide to keep all or some of your accounts separate is a highly-personal decision. One way to address it is the “yours, mine, ours” approach, also known as the “three-pot” approach. To keep some financial autonomy, you and your partner might each maintain credit cards and checking accounts in your own names to cover personal expenses or debt repayments. The bulk of your monthly income, however, would go into a joint account to cover your monthly bills and shared expenses. Head on over to our Help Center for more information on how to manage money with a partner at Betterment. If you’re married, weigh the pros and cons of filing taxes jointly In most cases, the financial benefits of you and your spouse filing one joint tax return will outweigh each of you filing separately, but it‘s important to know and understand your options. When you choose to file separately, you limit or altogether forgo several tax breaks and deductions including but not limited to: Child and Dependent Care Tax Credit Earned Income Tax Credit The American Opportunity Credit and Lifetime Learning Credit for higher education expenses The student loan interest deduction Traditional IRA deductions Roth IRA contributions That being said, you might consider filing separately if you find yourself in one of these scenarios: You and your spouse both have taxable income and at least one of you (ideally the person with the lower income) has significant itemized deductions that are limited by adjusted gross income (AGI). You participate in income-driven repayment plans for student loans. Filing separately may mean lower monthly loan payments in this scenario. You want to separate your tax liability from your spouse’s. If you know or suspect that your spouse is omitting income or overstating deductions and/or credits, you may want to file separately. You and/or your spouse live in a community property state. Special rules apply in these states for allocating income and deductions between each spouse’s tax return. We’re not a tax advisor, and since everyone’s situation is different, none of this should be considered tax advice for you specifically. If you have questions about your specific circumstances, you should seek the advice of a trusted tax professional. Update (or establish) your estate plan An estate plan can define what will happen with the people and things you’re responsible for if you die or become incapacitated. Who will make medical or financial decisions on your behalf? Who will be your child’s new guardian? How will your finances be divided? Who gets the house? If you haven’t yet created one, now may be the time. And if you have, it’s important to keep it up-to-date based on your latest life circumstance. Don’t forget to update your beneficiaries on any accounts that may pass outside the estate. That’s because beneficiary designation forms—not your will—determine who inherits your retirement savings and life insurance benefits. You can review, add, and update beneficiary listings on your Betterment accounts online.